Weekly Market Outlook

Indian equity benchmarks ended the passing week in red terrain on account of sharp selling by foreign portfolio investors (FPIs) ahead of the general election outcome. Also, the market has discounted several positives and lacks fresh triggers to sustain gains and move higher.

Key gauges made a quiet start to the week amid growing uncertainty over the delay in rate cuts and persisting higher inflation. Traders remained cautious as RBI said India’s forex reserves dropped $2.412 billion to $637.922 billion as of April 26, in the third consecutive weekly decline in the reserves.

The HSBC final India Services Purchasing Managers’ Index, compiled by S&P Global, fell to 60.8 in April from 61.2 in March, confounding a preliminary estimate for a rise to 61.7. Despite the decline in the headline reading, the figure still marked one of the fastest growth rates in just under 14 years.

Sentiments remained dampened even as India Ratings and Research revised upward the country’s GDP growth estimate for FY25 to 7.1 per cent from 6.5 per cent earlier. The projection is marginally higher than the Reserve Bank’s estimate of 7 per cent. The rating agency said strong support from the sustained government capex, deleveraged balance sheets of corporate and banking sector, and the incipient private corporate capex cycle make it revise its estimate.

Some cautiousness also came as an industry-wise analysis of the National Accounts Statistics 2024 data showed gross capital formation (GCF) – or investment – in manufacturing, construction, and mining sectors contracted in FY23 primarily due to a fall in export demand and low private consumption during the year.

Besides, the Ministry of Statistics and Programme Implementation (MoSPI) in its National Account Statistics 2024 stated that net household savings declined sharply by Rs 9 lakh crore to Rs 14.16 lakh crore in three years to 2022-23. The net household savings peaked at Rs 23.29 lakh crore in 2020-21. These have been on the decline since then.

Selling continued as traders remain concerned with a private report stating that India’s consumer price inflation is likely to have eased to 4.80% in April, just shy of March’s rate as food inflation remains sticky. As per the report, with parts of the country experiencing a heatwave, food prices continue to pose an additional risk to India’s inflation trajectory.

Domestic sentiments got hit after the RBI in its latest data report showed that India’s outward foreign direct investment (OFDI) commitments declined 18.29% to $2943.98 million in April 2024 as compared to $3602.95 million in April 2023. In March 2024, it stood at $3,963.94 million.

However, the final day of trade witnessed some gains as sentiments got some support as the Export-Import Bank of India forecasted India’s merchandise exports to grow 12.3% on-year at $116.7 billion in the April-June quarter of FY25, on strong economic fundamentals and sustained manufacturing and services activity. 

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 1213.68 points or 1.64% to 72,664.47 during the week ended May 10, 2024.

The BSE Midcap index lost 1386.78 points or 3.27% to 41,027.75, while the small cap index slipped 1794.42 points or 3.80% to 45,396.99. 

On the sectoral front, S&P BSE PSU was down by 988.95 points or 4.84% to 19,432.11, S&P BSE Consumer Durables was down by 2,607.24 points or 4.76% to 52,203.64, S&P BSE Oil & Gas was down by 1,311.80 points or 4.50% to 27,833.31, S&P BSE Finance was down by 414.50 points or 3.84% to 10,378.0 were the top losers.

S&P BSE Fast Moving Consumer Goods was up by 253.59 points or 1.29% to 19,857.43, S&P BSE Auto was up by 643.18 points or 1.25% to 51,984.19 and S&P BSE TECK was up by 52.33 points or 0.34% to 15,667.57 were the few gainers on the BSE.

NSE movement for the week

The Nifty slipped 420.65 points or 1.87% to 22,055.20.

On the National Stock Exchange (NSE), Bank Nifty was down by 1502.45 points or 3.07% to 47,421.10, Nifty Mid Cap 100 was down 1402.85 points or 2.75% to 49,532.30 and Nifty Next 50 lost 1836.30 points or 2.79% to 63,934.20, while Nifty IT was up by 26.75 points or 0.08% to 32,935.15.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in the equity segment in the week, with gross purchases of Rs 70,069.86 crore and gross sales of Rs 88,308.59 crore, leading to a net outflow of Rs 18,238.73 crore.

They also stood as net buyers in the debt segment with gross purchases of Rs 11,320.98 crore against gross sales of Rs 11,196.01 crore, resulting in a net inflow of Rs 124.97 crore.

In the hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 71.36 crore and gross sales of Rs 196.87 crore, leading to a net outflow of Rs 125.51 crore.

Outlook for the coming week

Indian markets ended significantly lower in the passing week, with cut of over one and half a percent amid foreign fund outflow ahead of the general election outcome. 

In the coming week, investors will be eyeing major macro-economic data starting with the Consumer Price Index (CPI) or retail inflation data for the month of April to be out on May 13 for more cues. Retail inflation in India fell to 4.85% in March 2024, the lowest since May 2023, from 5.09% in February and compared to forecasts of 4.91%.

On the very next day, May 14, market participants will be watching for the Wholesale Price Index (WPI) Inflation data for April. On May 15, investors will be awaiting Exports and Imports data as well as Passenger Vehicles data.

Further, investors will be eyeing Bank Loan growth, Deposit growth and Foreign Exchange Reserves data to be out on May 17.

In the ongoing result season, traders will be eyeing the earnings of prominent companies, including Tube Investments of India, Aditya Birla Capital, BASF India, Andhra Paper, Shree Cements, Radico Khaitan, V-Mart Retail, Power Finance Corporation, Rail Vikas Nigam, LIC Housing Finance, Granules India, Trident, Thomas Cook (India), Hindustan Aeronautics.

On the global front, investors would be eyeing some important economic data from the world’s largest economy, the United States (US), starting with Consumer Inflation Expectations on May 13.

On the same day, investors will be looking for Fed Jefferson and Fed Mester Speech for more directional cues. Producer prices in the US, Redbook, Fed Chair Powell Speech on May 14, API Crude Oil Stock, Core Inflation Rate, Retail Sales, Business Inventories, EIA Crude Oil Stocks on May 15.

Initial Jobless Claims, Export and Imports prices, Industrial Production on May 16, and Baker Hughes Oil Rig Count on May 17.

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